AIRCRAFT INVESTMENT AND FINANCE THROUGH HEDGE FUNDS
Since aircraft have been invented, we have become fascinated with flying. Not only that, it is now an everyday part of our lives. There is a really wide variety of aircraft out there now. From helicopters, 6 or 4 seater light airplanes, all different sizes of jets, giro copters, ultra lights and old style airplanes.
The high costs involved with the aircraft sector are diverse. Due to this factor, leasing aircraft is becoming much more popular and it also makes sense. Whether you are a company or individual, leasing flying machines is a good option to take.
Aircraft leasing transactions are categorized into finance leasing and operating leases. Finance lease is required to meet any of these criteria: a lease term greater than 75% of the aircrafts estimated life, option to purchase the asset for less than fair market value, or ownership of the asset to be transferred to the lessee when lease expires. It is always enhanced by tax benefits and is shown on the balance sheet of the lessee. Generally, it is for a long term period. On the other hand, an operating lease is usually signed for a short term period. Presently, aircraft leasing is mostly on the basis of this type of lease. According to statistics, there are about 12500 commercial aircraft in the world, among which about 2500 work on operating lease.
It is always preferable to acquire aircraft leasing services from Commercial Aircraft Sales and Leasing? A collective term given to organizations engaged in marketing airliners from manufacturers such as Boeing and Airbus. A countless number of other providers, such as commercial banks, financial institutions, and HEDGE FUNDS, are also in the scenario to make available aircraft leasing services.
For the purpose of this article, we shall only explore the “aircraft finance services” provided by hedge funds.
As earlier noted, the worldwide demand for new aircraft is so strong (and the supply so limited) that hedge funds have begun trading 75-ton Boeings and Airbuses as readily as they do crude-oil contracts. "Investors are out there sitting on $500 million, $1 billion [for buying planes],"But finding aircraft is just so hard today, much less finding one at a good price."
But hedges spotted a flaw in the model: Aircraft were financed based on the creditworthiness of airlines rather than the value of the actual planes. And with global demand for travel trending up, the funds bet that the metal could be alchemized into flying gold.
Worth noting is the fact that Hedge Funds maintain an important position in the aviation leasing market and provide a significant source of equity, lending and leasing capital in spite of the ‘capital intensive’ nature of the sector.
Why are Private Equity and Hedge Funds attracted to this market?
Significant amounts of capital can be put to work in aircraft related transactions.
Aircraft assets, while subject to business cycle and risks, have generally not been subject to as wide valuation fluctuations as other asset types, particularly newer aircraft
Debt can be structured in the form of an asset-backed security, which qualifies as debt for tax, with no U.S. withholding tax on interest, allowing wide range of entities to invest and tax, with no U.S. withholding tax on interest, allowing wide range of entities to invest and participate, even if underlying assets generate U.S. source income
Aviation leasing assets provide current lease income and special tax benefits, unlike typical “J Curve” investment fund or venture capital return profiles
Aviation assets are “hard assets” and in turbulent times, investors flock to hard assets.
Learning curve for establishment of relationships, technical expertise, documentation of operating leases and purchase transactions help protect the aviation investment and finance industry from complete market overrun and structurally provides a limit or governor on new competitors.
Finally, for your aircraft leasing services, aircraft sourcing as well as financing packages for new and used commercial and corporate aircraft, search no further. Jet Supersonic Air is your best bet for these services.
For more details on Jet Supersonic Air, please visit: http://www.jetsupersonicair.com